Professional Documents
Culture Documents
Elmar Kulke
Electronic version
URL: http://journals.openedition.org/belgeo/10865
DOI: 10.4000/belgeo.10865
ISSN: 2294-9135
Publisher:
National Committee of Geography of Belgium, Société Royale Belge de Géographie
Printed version
Date of publication: 30 June 2006
Number of pages: 27-40
ISSN: 1377-2368
Electronic reference
Elmar Kulke, « Competition between formats and locations in German retailing », Belgeo [Online],
1-2 | 2006, Online since 19 December 2013, connection on 01 May 2019. URL : http://
journals.openedition.org/belgeo/10865 ; DOI : 10.4000/belgeo.10865
Belgeo est mis à disposition selon les termes de la licence Creative Commons Attribution 4.0
International.
Competition between formats and locations in German retailing 1
Elmar Kulke
Introduction
1 During the last decades retailing in Germany faced a profound change in the supply
structure, the consumer behaviour and the locational distribution. On the supply side the
appearance of new formats of retail stores, the enterprise concentration process and the
progressive internationalisation not only changed the supply-structure but in addition
induced a shift in the importance of retail locations. Very recently consumer behaviour
undergoes alterations linked with post-fordist individualisation of shopping motivation
and of spatial orientation towards different centres; Nearest-Centre-Links become less
important while often changing spatial flexibility in consumption dominates. This article
investigates in the first part the mayor development tendencies of the supply and
demand side and shows their effects on the locational distribution of retailing in
Germany. In the second part differences between West- and East-Germany, which
resulted from the socialist system in the GDR and the reunification process, will be
discussed.
2 For a long period, the structural change of the supply side was influenced by the
appearance of new types of stores. This restructuring of the supply is characterised by the
retail life-cycle hypothesis. It postulates that each type or format of retailing has only a
limited life span and in the course of its development regular changes occur in its market
share (cf. Brown, 1988; Kulke, 1992). A type or format of retailing can be described by
typical characteristics like average sales space, service intensity, price level and
assortment of goods. There is a continual emergence of new formats of retailing, however
only those survive, whose characteristics comply better with the existing conditions of
supply and demand than those of older formats. In the beginning of the life-cycle only a
few retailers of the new type exist. If this new format is successful it gains significantly in
importance in the following growth phase. The market share of the new format increases
and it replaces older formats. The maximum market share is reached during the maturity
phase, while towards the end of the life-cycle the sales stagnate or even reverse.
3 The changing market share of retail formats can be observed in Germany during the last
decades (Fig. 1). In food retailing small stores with sales assistants dominated until the
end of the 1950s. Beginning in the early 1960s, they were gradually replaced by the new
type of self-service store, which used the new self-service-principle and operated on a
larger space with a broader assortment of articles. In the 1970s a new type of store – the
so called supermarket – expanded steadily. Supermarkets were bigger (more than 400
sqm sales space) and offered a more varied assortment of articles at a lower price level.
From the mid 1970s in addition hypermarkets expanded very rapidly. They are large
businesses (more than 1,000 sqm sales space) pursuing an aggressive price policy, are
selling groceries and are offering a wide variety of simple non-food articles. During the
last 10 to 15 years the most successful format has been the discount store (e.g. Aldi, Lidl);
these stores have more or less the same size like supermarkets but are offering a highly
standardised assortment (e.g. supermarkets have usually between 8,000 and 12,000
articles but discount stores only offer 660 to 1,300 articles; Kulke, 2004) on an extremely
low price level; therefore they possess a better cost structure and are more and more
replacing the classical supermarket.
Figure 1. Change in the market share of different retail formats in food retailing in Germany (until
1990 only West Germany).
4 Comparable shifts between formats can be observed in the non-food sector (Fig. 2). Until
the 1970s, two types of formats, the department stores offering a wide assortment of
goods and the specialised stores with a small but deep range of articles, were dominating
the market. Since then both have been increasingly replaced by specialised discount
stores. They are relatively large retail businesses offering a similar range of goods like
specialised stores, but the self-service principle and a relative low personnel intensity
allows these markets to sell their goods at a lower price level.
5 The structural change according to the life-cycle hypothesis has in addition spatial effects
(Klein, 1997; Kulke, 1998). Due to the factor that every new format has other typical
characteristics, their locational preferences differ compared to old formats (Fig. 2). In
general one larger unit often replaces more than one smaller unit; therefore the number
of stores is reduced and especially in scattered locations and smaller housing areas with a
limited demand potential a thinning out process of the supply network can be observed.
In addition the new formats contributed to the suburbanisation process of retailing.
Classical self-services stores were located mainly in the housing areas, the supermarkets
were already found in urban sub-centres or in open spaces in the neighbourhood of the
housing areas. The hypermarkets predominantly chose non-integrated locations at the
outskirts of the towns; there they find reasonably priced and sufficiently large building
lots with good road connections for private transportation. Because of their size they are
often unable to find the space they need in the existing centres. Very recently the
discount stores are replacing supermarkets in housing areas; with them a local supply can
be sustained but with a smaller assortment of articles.
Figure 2. Characteristics, market share and locations of different retail formats in Germany.
6 The change of formats and locations in West-Germany took place over a period of four
decades. Step by step bigger units gained in importance (in Fig. 1 the years 1966-1990),
which induced a thinning out process of the supply network especially in the housing
areas and small villages and encouraged the development of suburban shopping
locations. In contrast East-Germany possessed at the time of the reunification a very
traditional structure of formats (Kulke, 1998, p. 175f); the food sector was served by
several relatively small units and non-food articles were offered by a limited number of
classical department stores and specialised stores. Hence, the average floor space per
store amounted in the GDR in 1988 only to 68 sqm compared to 200 sqm in West-Germany
(in 1985). With the reunification many new big formats were opened in the East while
most of the small units had to be closed; this can be seen in Fig. 1 by the fast reduction of
the Number of self-service stores between 1990 and 1995. Due to the transformation
induced change today modern formats (hypermarkets, discounter, specialised discount
stores) and non-integrated locations (table 1) have a higher share in the East than in the
West.
Source: Kulke, 2002; based on surveys in the Berlin area and estimations in West-Germany
7 During the last decades in parallel with these changes of the formats was a structural
change of the companies. In the past a traditional one-store enterprise, where the owner
himself was working in the store, was typical for retailing; usually these stores were
linked to an wholesale trade organisation which delivered the goods. Since the 1960s a
strong enterprise concentration process can be observed in German Retailing. Today
large enterprises with several chain-stores are dominating the market. The Gini-
coefficient, which shows the distribution of sales shares among the business size classes
of enterprises, rose from 0.72 in 1962 to 0.87 in 2002 (Fig. 3). These chain-stores offer a
highly standardised assortment of articles and are especially concentrating on those
goods, which are sold very often. With the strategy of having several stores and
distribution centres these companies are able to realise internal economies of scale. And
due to the factor that they are buying large volumes of articles they are in the position to
put pressure on producers concerning prices and qualities.
N.B. The territory for the years 1962 to 1992 is West Germany (FRG) and for the years
1998-2002 Germany (including West Germany and the territory of the former GDR).
8 During the last ten years the strong position of the companies further increased with the
introduction of new technologies (Henschel, 2005). The big companies were the first to
introduce modern supply chain management systems based on information and
communication technologies. With the use of scanner-cash-boxes and electronic article
management systems they were able to optimise the assortment and the delivery system.
But in addition, by using these electronic systems, they now have an advantage in
9 The enterprise concentration process has effects on the locational system of retailing.
Compared to independent stores the chain stores usually have lower costs and a higher
sales space productivity; therefore they are able to occupy the more attractive (and more
expensive) locations in the urban centres while independent retailers are either forced to
close down or to survive in spatial market niches. Surveys show (e.g. Kulke, 1998) that
chain-stores are dominating the city-centres, the planned shopping-centres and the large
retail agglomerations at the outskirts of the towns. Independent retailers are only found
in higher shares in small villages and in minor sub-centres and housing areas of towns
where only a limited demand potential is available. And these areas face a further
thinning out process of supply when the shop-owner reaches the retirement age, because
no successor is willing to continue with the business.
10 Comparing West- and East-Germany, the share of chain-stores is even higher in the East
than in the West. Before the reunification (1988) independent stores only gained 11.4% of
the turnover in the GDR (compared to 39% of one-store enterprises in West-Germany;
EUROSTAT, 1993). The privatisation process after the reunification encouraged the
development of independent stores but with the fast entrance of West-German chain-
stores to the East-German market many of them had to close down soon.
Internationalisation of retailing
11 For a long time retailing was mainly dominated by local or national companies. Only just
during the last decade more and more big enterprises tried to open up new markets in
foreign countries (table 2). Driving forces for the internationalisation are the stagnating
sales at the home market, the more easy international relations in Europe due to the EU-
integration process and the expectation to gain additional turnover in other markets
(Alexander, 1997; Kulke, 1997, McGoldrick and Davies, 1995, Wortmann 2003). Typically
enterprises use for the international expansion retail formats, which have proved to be
successful at the home market and which are different to existing formats in the foreign
market. Examples for that are the Swedish furniture seller IKEA (with 216 stores in 21
foreign countries, 2005) or the German grocery discounter Aldi (with 3,741 stores in the
home country an with 2,643 stores in 11 other countries; 2002), which both were
successful on the international market with new formats.
successful (like Wal-Mart with 92 units; 2002). This can be explained by the strong
domination of big national chains (in 1999 the ten biggest food-chains gained a share of
81% of the turnover), by the high price competition in Germany and by logistical
problems for new companies.
18 In East-Germany (Jürgens, 1996; Meyer, 1992; Pütz, 1997) the starting point was quite
different. Like in all socialist countries there was a planned hierarchical system of non-
food centres in the towns and a very dense system of small food-stores in the housing
areas; non-integrated locations did not exist (table 1). In general the supply was very
limited compared to the West; the average floor space per inhabitant amounted in East-
Berlin only to 0.32 sqm per inhabitant compared to 0.94 sqm in West-Berlin (table 3). And
there always was more consumer demand for non-food articles than available supply
(table 4).
19 With the reunification very suddenly the new formats of retailing were established and
the new forms of consumer behaviour – due to an rapid increase in income and private
mobility – were adopted. And the planning restrictions of West-Germany did not exist at
that time in the East, which opened a locational window of opportunity for establishing
retail spaces in non-integrated locations. Immediately after the reunification all stores
were privatised. Most of the small food-stores (mainly small self-service stores) had to
close down, because they had an unfavourable cost structure and a limited assortment of
articles and therefore were not able to compete with the modern super- and
hypermarkets. Within a few months West-German chain-stores took there chance to
conquer the East-German market by opening modern formats; in the beginning they
mostly chose locations at the outskirts of towns and villages. In the built up areas – due to
unsettled proprietary rights – almost no locations were available. Only a little bit later,
large specialised discount stores and shopping centres were developed in non-integrated
locations. Until the mid nineties these developments caused a strong suburbanisation
process of retailing while the supply network in the towns deteriorated. These
developments can be seen in the Berlin-area (table 3). Until the mid-nineties the
strongest expansion of floor space occurred at the outskirts of the agglomeration; there
the floor space per inhabitant rose from 0.27 sqm to 1.42 sqm.
20 In the middle of the nineties the suburban developments were limited by planning laws
and in addition the proprietary rights in the built up areas were cleared. Since then a
reorientation towards the urban areas can be observed, where several shopping centres
were developed during the last years. They now fulfil the function of city-centres and
urban sub-centres but are very different in their characteristics compared to West-
German centres. Usually they are owned by one developer, who rents the lots to national
and international chain stores; in general the share of independent stores in East-
Germany is very limited. All stores are located in one building surrounding a pedestrian
zone; restaurants and other service units are included and nearby parking facilities
available. These new units are very attractive either for price-shoppers or for
entertainment-shoppers. This reorientation can be seen in Berlin; there the sales space in
the built up areas increased during the years 1997 to 2003 by 28.4% and the sales space
per inhabitant today amounts to 1.25 sqm.
21 Today at the outskirts of the towns a overstoring-process already can be observed and
some of the less attractive units are now closing down there. But still until today the
market share of non-integrated locations is in East-Germany much higher than in West-
Germany (table 1).
Conclusion
22 To explain retail developments always the combination of changes on the supply side, of
modifications in consumer behaviour and of influences of the planners have to be taken
into consideration. During the last decades the appearance of new retail formats, the
enterprise concentration process and very recently the internationalisation were driving
forces for retail change. At the moment new forms of consumer behaviour show
increasing importance for the locational developments. Looking at the position of
different types of retail locations in competition, centres with an attractive mix of
formats, complementary services and a broad assortment of articles and locations with
discounters seem to be the winners. Problematic is the position of scattered locations and
of smaller sub-centres without special attraction.
BIBLIOGRAPHY
ALEXANDER N. (1997), International Retailing, Oxford.
BROWN S. (1988), « The wheel of the wheel of retailing », International Journal of Retailing, 3,
pp. 16-37.
GEREFFI G. (1996), « Global commodity chains: new forms of coordination and control among
nations and firms in international industries », Competition and Change, 4, pp. 427-439.
GUY C. (1998), « Controlling new retail spaces: the impress of planning policies in western
Europe », Urban Studies, 35, pp. 53-979.
HEINRITZ G., KLEIN K., POPP M. (2003), Geographische Handelsforschung, Berlin/ Stuttgart.
KULKE E. (1992), « Structural change and spatial response in the retail sector in Germany », Urban
Studies, 29, pp. 965-978.
MCGOLDRICK P.J., DAVIES G. (Ed., 1995), International Retailing, Trends and Strategies, London.
PÜTZ R. (1997), « Der Wandel der Standortstruktur im Einzelhandel der neuen Bundesländer. Das
Beispiel Dresden », Mainzer Kontaktstudium Geographie, 3, pp. 37-65.
WRIGLEY N., LOWE M. (Ed., 1996), Retailing, Consumption and Capital, Harlow.
ABSTRACTS
The structure and locational system of retailing in Germany faced during the last decades a
profound change. Important factors were on the supply side the appearance of new formats of
retail stores, the enterprise concentration process and the progressive internationalisation. They
not only changed the supply-structure but in addition induced a shift in the importance of retail
locations. Very recently consumer behaviour undergoes alterations linked with post-fordist
individualisation of shopping motivation and of spatial orientation towards different centres.
These changes induced a shift towards attractive centres and sub-urban locations while scattered
locations are under strong pressure.
INDEX
Keywords: retailing, retail formats, consumer behaviour, locational change
Schlüsselwörter: Einzelhandel, Einzelhandelsbetriebsformen, Konsumentenverhalten,
Standortwandel
AUTHOR
ELMAR KULKE
Humboldt-Universität zu Berlin, Geographisches Institut, Unter den Linden 6, 10099 Berlin,
elmar.kulke@geo.hu-berlin.de